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Hi
I have a question about FX on Inventory as I am not sure if my understanding is correct
Inventory is a non monetary asset, so if the entity buys in foreign currency, should they translate the cost of inventory at a spot rate each time they buy new inventory? and
there is no retranslation at fye rate as in the case of receivables for example?
but If this is correct, then entity will end up with the same items valued at different amounts? It seems a bit strange and that is why I am afraid there is something about IAS 21 I am not clear about
Thank you
Hi,
You’re correct in your understanding of translating inventory purchased in a foreign currency at the spot rate each time new inventory is purchased.
You are also correct in that it does not require retranslating at the reporting date as it is a non-monetary item.
The items will therefore be valued differently depending upon when they were purchased but their value is different due to the different exchange rates used, so isn’t an issue.
Thanks
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